City wants nonprofit Washington Hospital to pay up

An agreement with Washington Hospital to restart annual payments to the city in lieu of property taxes failed Thursday night when council couldn’t agree on the contract proposal.

But that doesn’t mean the agreement, which would pay the city a total of $561,832 over the life of the 11-year contract, is dead.

The proposal failed after Councilman Terry Faust raised concerns about the city being locked into a vague contract and Councilwoman Tracie Graham Rotunda abstained because she works for Washington Health System. Mayor Brenda Davis and Councilman Joe Manning voted in favor of the proposal, but Ken Westcott was absent and not able to cast a third vote to pass it.

Manning said they might schedule a special meeting later this month to try again with Westcott or vote during next month’s meeting.

The proposal started with a retroactive payment of $46,100 made immediately with a 2 percent increase every year until it expires in 2023.

City officials have been working on the deal with the hospital for two years after the previous contract expired in 2012. That 10-year deal, however, was modified in 2002 just a year after both sides agreed because the city was in dire financial trouble and needed a lump sum of $425,000 rather than the even distribution.

That led to a recent disagreement between sides when city officials asked for the hospital to restart the contract in 2013 at a higher level. However, hospital officials declined and wanted to return to the $42,500 per year the previous contract called for instead of adjusting for the 2 percent annual increases that were wiped away by taking the lump sum. They eventually settled on a slightly higher number.

Davis said they were disappointed they were unable to increase the package even more, but that they had little choice than to move forward with the vote moments before it failed.

“Take it or (we) get nothing,” Davis said about the city’s options. “That’s a really hard pill to swallow.”

Although the city pushed for a higher starting point or larger annual increases, Manning expressed “gratitude” to hospital officials for working with them. He pointed to the problems between Pittsburgh and UPMC over disagreements about the health provider’s tax-exempt status.

“This has been a long time in coming,” Manning said of the negotiations. “Here, we’re fortunate to have a hospital that at least meets us halfway.”

City Solicitor Jack Cambest said he would review the proposal and once again prepare it for council to vote again. He said Thursday night’s vote would not hamper the contract from being considered again in the future. Cambest added that the city would not be tied to the contract if state lawmakers ever pass legislation to strip the tax-exempt status from hospitals and other non-profit organizations.

The city first entered into the “payment in lieu of taxes” program, in 1993 when the hospital paid $40,000 per year to it and gave $53,000 annually to the school district. The “PILOT” program options changed in 2002 immediately after the second 10-year deal was accepted when Washington teetered on bankruptcy and needed a major influx of cash. The city has not received any money from the hospital since getting the lump sum payment in 2002.